Who's pay's $1,300 for rent?

Delaware City, DE · Member since 2016 · 25 posts · 13 votes

All,

I often see on here landlords that charge around $1,300 for rent but I personally don't know anyone who pays such high rent. If you have $1,300 rent why not buy? I know people usually say that they don't want to settle in the area for long so they don't buy but i'm sure if the deal was good enough then they could sell with instant equity. Also I hear people don't have good credit so they can't buy, but some landlords screen out bad credit tenants. Obviously if they live in NYC I understand but 1,300 buys a lot of house in other areas. So what I want to know is who is paying all this rent after all?

-Irwin

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Michaela G.

Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes

Location, location, location

When I lived in California I paid $ 2400 and that was a bargain, because I was 30 miles south of L.A. And no, I couldn't have bought with that money. Same in the SF Bay area.

Maybe it's a lot for rent in Delaware City, but it might not be somewhere else.

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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
Location, location, location
When I lived in California I paid $ 2400 and that was a bargain, because I was 30 miles south of L.A. And no, I couldn't have bought with that money. Same in the SF Bay area.
Maybe it's a lot for rent in Delaware City, but it might not be somewhere else.
14 Reply
Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
People will frequently rent as a means to reduce commuting time, distance and costs.
Even if the rent might be the same as a PITI mortgage payment, some will STILL opt to rent to avoid maintenance and to have more amenities.
6 Reply
Michelle B.
Investor · Lebanon, OH · Member since 2016 · 144 posts · 87 votes
9y
Irwin Haddox Most of my rentals are greater than $1000 a month, with my highest being $1400. Most of my renters are people that make plenty of income to afford it but have less than stellar credit and therefore can't (and likely never will) qualify for a mortgage. Cheers! Michelle
8 Reply
Natalie KolodijBusiness Member
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
9y
I would KILL to pay $1,300 for rent.
There's literally not one house for rent in my town for under $1,750 right now.
Why? Because there's literally not one house for sale that's under $300k.
Why not buy? Because unless you've got a large deposit, willing to waive inspection, and willing to pay at/above asking you won't get the house you want right now.
Seattle area market is insane
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Irwin Haddox
OP
Delaware City, DE · Member since 2016 · 25 posts · 13 votes
9y
So location, down payment, credit and commute is that it?
2 Reply
Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
Not wanting to get tied down too long.....being able to rent something nicer than I can buy for that price.....I'm sure there are others
2 Reply
Manuel Fortes
Real Estate Investor · Edmond, OK · Member since 2014 · 16 posts · 13 votes
9y
I would put emphasis on down payment. Most people can't come up with 20-50k.
6 Reply
Blaine Brown
Investor · Dover, DE · Member since 2016 · 35 posts · 23 votes
9y
I find that military or other type of work that forces you to move every few years are prime people looking for higher end rentals in my area. When I lived in Oklahoma a few years ago rent in small towns was high. Oil workers knew they were there for a year or two and this drove the rental market. Both had good incomes with good credit. Not having to deal with a sale of a home and eat the sales commission after living in a home for two years is appealing for these types. It sure was to me when I was active duty. Obviously buying to rent out after you leave is an option; however, many do not want to play that game.
6 Reply
Eric Higgins
Investor · Framingham, MA · Member since 2014 · 3 posts · 5 votes
9y
Location! I rent a single family about 30 minutes outside of Boston for $2,700/month. Purchased back in 2011 for just under $15k (down payment), have been loving it ever since.
I rent an apartment in Worcester for $675 - $850/month. Sure, different building types, but an hour drive separates the two.
5 Reply
Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
9y
In 2009 I lived in the SF Bay area and I rented a house in Point Richmond for $ 2495/month. It was worth about 1M . It was overlooking the Bay bridge and San Francisco Bay. 2 stories. Very nice. I couldn't have afforded to buy it and buying something for that monthly payment would have been a fixer-upper in a bad neighborhood.
2 Reply
Dan MahoneyPro Member
Financial Advisor · Atlanta, GA · Member since 2016 · 256 posts · 350 votes
9y
$1,300/month renters are not necessarily being irrational. Here are a few reasons:
1) Qualifying for a $1,300 rental is easier than qualifying for a $250,000 mortgage with a $1,300 payment. Mortgage lenders consider DTI, asset coverage, etc., but most landlords just consider rent to income. As you point out, both consider credit. (Yes, NYC is an exception to this and all other rules.) Also outside of some government supported programs (e.g, FHA, VA) most lenders want to see a substantial down payment, which is a huge barrier for people who live paycheck to paycheck.
2) There are lots of reasons one might need a place to live immediately (e.g., new job, divorce, starting school). Even if one can qualify for a mortgage, a 60-90 day search-contract-close timeframe is simply not workable for a lot of people.
3) Transaction costs of 5-10% on the buy and the sell (e.g., realtor, mortgage, attorney, tax) often make it more economical to rent if you aren't going to stay put for at least 5-10 years. Most younger people aren't going to live in a house for 30+ years like their grandparents did.
4) Tax deductions for mortgage interest and property taxes only become interesting once you've reached a certain income level. People that earn <$50k/yr don't pay much in income taxes.
6 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
9y
I'm currently renting short term in between having sold my old house and not having bought a new one yet. I'm paying $3,000 a month. One of my rental properties rents for $2800 a month.
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6 Reply
Account Closed
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
9y
Irwin,
Great question. In some areas, it's cheaper to buy than to rent. In high priced markets like ours, it can be cheaper to rent than to buy. My partner rents his 43-year old 2,400sf house in Palo Alto for $9,800/mo. Zillow values that house at $3.5M. So it's much cheaper to rent than to own it. It has been rented out for almost 5 years with almost no vacancy. The current tenant paid the previous tenant $10k to move out 2 weeks early so they can move and settle in early. It's all relative.
4 Reply
Anton Watt
Realtor · Florida / Atlanta · Member since 2015 · 210 posts · 53 votes
9y
In Atlanta rent for $1,300 is not far fetched. We see rents going from $750-$1400 regularly.
2 Reply
William Walker
Investor · Wilmington, NC · Member since 2016 · 211 posts · 262 votes
9y
My tenants
9 Reply
Eric Armstrong
Investor · Wilmington, DE · Member since 2013 · 394 posts · 123 votes
9y
@Irwin Haddox buy a 4-5 bedroom place and you may get 1250 from new castle county section 8.
1 Reply
Walmsley Gedeon
Brooklyn, NY · Member since 2016 · 115 posts · 40 votes
9y
Hey you ever been to New York? People rent rooms here for the price and higher.
2 Reply
Andrew Johnson
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Irwin Haddox Outside of markets with high rents, it can boil down to transaction costs. It can cost you 6%-10% to sell your home. Not to mention you might not be able sell instantly so you'll be "stuck" with holding costs. If you bought for $250K and couldn't insta-sell (especially if you wanted a good price) it's maybe $25K. That's 19 months of rent just to break even and that doesn't take into account annual property taxes, repairs, etc. In the hypothetical it could easily be 2 years before you're breaking even. Long story short, if you don't know where you'll want to be years from now it could make all the financial sense in the world to rent. And that's not even getting into the risk factor...cue conversations about '06, '07, '08...
2 Reply
Irwin Haddox
OP
Delaware City, DE · Member since 2016 · 25 posts · 13 votes
9y
Originally posted by @Dan Mahoney:

$1,300/month renters are not necessarily being irrational. Here are a few reasons:
1) Qualifying for a $1,300 rental is easier than qualifying for a $250,000 mortgage with a $1,300 payment. Mortgage lenders consider DTI, asset coverage, etc., but most landlords just consider rent to income. As you point out, both consider credit. (Yes, NYC is an exception to this and all other rules.) Also outside of some government supported programs (e.g, FHA, VA) most lenders want to see a substantial down payment, which is a huge barrier for people who live paycheck to paycheck.
2) There are lots of reasons one might need a place to live immediately (e.g., new job, divorce, starting school). Even if one can qualify for a mortgage, a 60-90 day search-contract-close timeframe is simply not workable for a lot of people.
3) Transaction costs of 5-10% on the buy and the sell (e.g., realtor, mortgage, attorney, tax) often make it more economical to rent if you aren't going to stay put for at least 5-10 years. Most younger people aren't going to live in a house for 30+ years like their grandparents did.
4) Tax deductions for mortgage interest and property taxes only become interesting once you've reached a certain income level. People that earn <$50k/yr don't pay much in income taxes.
Wow thanks this is exactly what I wanted to know.
1 Reply
Andrey Y.
Specialist · Honolulu, HI · Member since 2014 · 1k+ posts · 1k+ votes
9y
Originally posted by @Irwin Haddox:

All,
I often see on here landlords that charge around $1,300 for rent but I personally don't know anyone who pays such high rent. If you have $1,300 rent why not buy? I know people usually say that they don't want to settle in the area for long so they don't buy but i'm sure if the deal was good enough then they could sell with instant equity. Also I hear people don't have good credit so they can't buy, but some landlords screen out bad credit tenants. Obviously if they live in NYC I understand but 1,300 buys a lot of house in other areas. So what I want to know is who is paying all this rent after all?
-Irwin
Your house does not pay you. You pay it, taxes, mow the lawn, fiddle in the garage, pay the mortgage, etc. A house is a place is just a place to live. Despite what every American hears seemingly every year, your home is NOT an investment or asset. That is precisely why folks would pay $1300 for rent. I would pay $3000 for rent, for the right place in the right area :)
3 Reply
Mark Nolan
Watertown, MA · Member since 2016 · 27 posts · 17 votes
9y
As others have said, location is a big part. I have a multi in the greater Boston area under market at $1,850 and $1,950. Both units are 2/1 with a single parking spot.
$1,300 doesn't exist here.
2 Reply
Jimmy Ondecko
Real Estate Professional · Greenwood, IN · Member since 2017 · 2 posts · 2 votes
9y
While I never paid $1300+ for rent, I did quite a bit of renting up till last year (finally bought my first home). I paid in the 800-1k range within a midwestern city. Others may mention some of these items but here's a quick story of a "mid 20's tech talent moving into a midwest city (Indianapolis)".
Unsure job status - 5+ years ago I moved to a new city for a new programming job (mid 20s). I was confident I could find a job somewhere but I was not 100% sure if my new job would be a long term gig. You never know if your employer will be around forever or if you are in the company roadmap. In the tech world, it's not uncommon for talent to move from job to job every 2-4 years OR for the company to be gone in 1. I stayed with that company for 5+ years and renting allowed me to mitigate risk. It also allowed the door to stay open if an opportunity pops up in another city.
Laziness - I did not want to mow a lawn, shovel a driveway, or generally do much in terms of property maintenance. I was also focussed on personal investment at the time (learning and ramping up skills for the job). Renting bought me a lot of that.
No Roots - I was moving into a new city and had no roots (wife/girlfriend/kids). While that's not an uncommon story it's also worth highlighting how many people "meet" today. Online dating is not uncommon and it's not uncommon to meet someone within an hour driving range. Renting allows a wider radius and you can eventually plant roots somewhere else.
The list can go on and on... Flip a few variables for a different personality type (someone wants to walk/bike to work) and I can easily see $1300 in many urban areas.
I'm still pretty new in my "research areas" phase of getting into the real estate world but I would also take a look at some jobs in the area. As I mentioned before, I started as programmer and I eventually moved into a management. I've seen a pretty huge swing in some salary ranges for entry level positions and some tech talent can easily yield 100k+. Mix a high salary with individuals don't want to plant deep roots yet and I'm sure you can pull those prices.
2 Reply
David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
9y
@Irwin Haddox
For a typical 3 br rents in Pa. are around $1,250, some more, some less. 4brs rents are higher and we've rented 4 br SFH for as much as $2,050. One tenant we have in a high priced rental has 2 out of state properties that were former personal residences that they can't sell. Due to already having 2 mortgages other places they can't get a 3rd mortgage and buy at this time.
You can find out the Fair Market Rent for your area or any area in the country by going to a HUD website, www.HUDuser.org
That is the average rent figures compiled by survey of actual rents, so you can see what average rents are.
For New Castle County:
eff $845
1br    $1003
2br    $1211
3br    $1515
4 br $1686
4 Reply
Rob Lane
Oklahoma City, OK · Member since 2016 · 91 posts · 78 votes
9y
The majority of my homes are between $1000 & $1600 per month. These are Historical homes primarily close to downtown. I provide an incredible amount of service for those rents as well. Lawn care, etc. I even take the blue trash cans down to the curb for them. Luckily I have very minimal turnover which is the devil to us landlords. I have had $500 a month renters in the past and trust me the $1000 plus renter typically much higher quality tenanr in my experience.
2 Reply
Tyler Ansell
Investor · Tampa, FL · Member since 2015 · 293 posts · 175 votes
9y
Tampa, FL I'm currently renting a $1,350 in a 3/2/2 C+ area.
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